Here is the latest installment of NOL‘s new “Be Our Guest” series, this one by the pseudonymous Freeconomist. An excerpt:
Third-party certification provides assurance to consumers that a product or a supplier of professional services meets certain quality standards.
Private suppliers of third-party certification include organisations such as Consumer Reports, the American Automobile Association (AAA), which rates motels, or A.M. Best, rating insurance companies. Examples of third-party certification provided by the government are product safety regulation, food standards regulation or occupational licensure.
Private suppliers of third-party certification can only exist because the product they offer is valued enough by market participants to justify the cost of providing it. And their profits are determined by their credibility.
The same cannot be said for third-party certification provided by the government.
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